Congressional Republicans may enjoy the leverage the debt ceiling gives them, but economists dislike its very existence.
The University of Chicago Booth School of Business’s Initiative on Global Markets regularly polls economists on major public policy issues. This week’s statement, “Because all federal spending and taxes must be approved by both houses of Congress and the executive branch, a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes,” wasn’t very controversial. Just one out of 38 economists who were polled disagreed with it. A handful did not answer, were uncertain or had no opinion.
MIT’s David Autor commented, “The question contains its own answer.”
Others did not mince words at all. “The debt ceiling is a dumb idea with no benefits and potentially catastrophic costs if ever used,” said Richard Thaler of the University of Chicago Booth School of Business.
Thaler’s colleague, Luigi Zingales, was the lone dissenter. “It can also lead to potential better outcomes,” he said.
Raising the debt ceiling allows the government to pay bills it has already racked up and does not authorize future spending. The Treasury Department has said the country will run out of cash to pay its bills sometime between mid-February and early March if Congress refuses to raise the borrowing limit. GOP lawmakers have said they want spending cuts in exchange for raising the limit, but President Obama has vowed not to negotiate over raising the ceiling.